Freedom in the 50 States

The Affordable Care Act nationalized most health insurance regulation. In our “headline” index, we treat such nationalizations of policies that states formerly controlled as changes in state policies. We do so because our primary purpose is to measure freedom as citizens experience it, not as state legislators enact it. This choice allows us to compare the state of freedom over time, using the same policies. We do the same thing with certain gun laws and with sodomy laws, which have also been nationalized (in a pro-freedom direction).

All states are now required to have a small-group-adjusted community rating, individual market-adjusted community rating, individual market-guaranteed issue, bans on elimination riders, mandated external review of grievances, small-group prior approval of rates, nongroup prior approval of rates, and certain “essential benefits” mandates. States may still vary somewhat on the extent of mandated benefits, standing referrals to specialists, direct access to specialists, and bans on financial incentives to providers from insurers. The individual health insurance mandate was federalized but then, in a rare exception to the historical norm, was returned to the states. Some states (California, Massachusetts, New Jersey, and Rhode Island) have enacted their own individual mandates since that time.

Community rating and the individual mandate get the highest weights because they represent a large transfer of wealth from the healthy to the unhealthy of approximately $10 billion a year.¹ State-level mandated coverages raise premium costs for consumers. In this edition, we have extensively reviewed statutes to determine the onset of the costliest mandated benefits, such as in vitro fertilization and occupational therapy, by state. The health maintenance organization (HMOs) regulations have low victim costs because public backlash against particular practices, such as financial incentives to providers, drove them from the marketplace even before laws were passed.² In this case, public opinion drove both market practice and state law. Nevertheless, research suggests that public opinion on this issue may be misinformed. In their heyday in the 1990s, when many of the now widely banned practices were widespread, HMOs successfully suppressed health care costs.³